Turkish lira drops nearly 8% after surge triggered by intervention – business

The pound fell nearly 8% against the dollar on Monday amid continued investor concern over Turkey’s monetary policy, having jumped more than 50% last week after billions of dollars in interventions on the state-supported market.

The pound was also supported last week by a government move to cover exchange losses on some deposits.

It weakened to 11.6 against the greenback on Monday before cutting losses to trade at 11.35 around 0800 GMT.

“The main resistance in the exchange rate is at 11.45 and 12.0, with support levels at 10.57 and 10.25,” QNB Invest said in a daily bulletin.

Read more: Erdogan sacks finance minister as Turkish lira crashes

Last week’s rally took the Turkish currency back to mid-November levels.

As of Monday, it plunged to an all-time low of 18.4 per dollar, after falling for several months on fears of runaway inflation driven by a succession of interest rate cuts designed by President Tayyip Erdogan.

At current levels, the currency is still 35% weaker than at the end of last year.

Erdogan unveiled a program last Monday under which the Treasury and the central bank would repay losses on deposits converted into pounds against foreign currencies, triggering the pound’s largest intra-day rally. Read more

The Turks did not sell dollars in large quantities on Monday and Tuesday of last week, according to official data suggesting they played little role in the gains. State interventions, meanwhile, cost the central bank more than $ 8 billion last week, according to traders’ calculations.

Read also : Turkish lira rebounds from historic low on government insurance

The central bank sold $ 1.35 billion in direct forex interventions on Dec. 2-3 to support the pound as it hovered around 13.5 per dollar, the data showed.

In an interview with the broadcaster HaberErdogan said the Turks trusted the local currency and deposits increased by Lira 23.8 billion after the anti-dollarization plan was announced.

But data from banking watchdog BDDK showed that after a strong build-up of dollars the week before, individual Turkish depositors held $ 163.7 billion in hard currency last Tuesday, virtually unchanged from Monday and Friday. where the total was $ 163.8 billion.

The lira was heavily boosted last week by what traders and economists called dollar stealings by state banks, backed by the central bank.

Under pressure from Erdogan, the central bank has cut its key rates by 500 basis points to 14pc since September, despite inflation which has soared to more than 21pc. Price increases are expected to exceed 30% next year, in part due to the depreciation of the pound, economists predict.

Istanbul’s main BIST 100 stock index rose 2.6% on Monday morning.

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